The Business Value of IT in Government
- 08 August, 2003 10:12
The Business Value of IT in Government
Justify the value of your IT investments in terms that government leaders can understand
Information technology investments take many forms and for every organisation it is a challenging task to identify, articulate and achieve the value they should provide.
Research by the Cranfield School of Management has identified the nature and scale of the problem that exists in most enterprises. Typically, less than one organisation in five ensures that all the potential benefits from IT investments are identified or are adequately quantified. And only a quarter of organisations regularly conduct post-implementation reviews to determine whether benefits have been achieved. Apart from the obvious problems of not realising the benefits, this also means that management loses the opportunity to learn from mistakes and to get better at choosing the right initiatives — and so the problem is perpetuated.
Not surprisingly, this leads to senior management having an ongoing dissatisfaction with the contribution of IT to the business. Business leaders remain highly sceptical about the mechanisms they have in place for translating IT investment into realised business value.
This need for an enhanced understanding of the value of IT is seen strongly in government organisations, where financial metrics alone have rarely proved to be adequate. The value that IT can contribute to government entities must relate to their mission and role and apply metrics that are specific to them and the expectations of their constituents. Government agencies face many pressures that are similar to commercial enterprises — doing more with less in a rapidly changing environment — as well as unique requirements that arise from their community and political obligations. Government agencies have long had microscopic attention paid to their success or failure in meeting highly visible public accountabilities, a situation that is now being quickly replicated with commercial organisations.
There are some basic steps that governments can take to adequately articulate and justify the value realised from investments in IT. An essential starting point is to have in place a performance measurement framework to articulate the benefits and value relating to each specific IT initiative. Gartner has created a reference framework that defines three core aspects of the business of government:
- Managing the supply of services to be responsive to constituents while working effectively with partners and suppliers and achieving internal operating efficiencies
- Providing support services to satisfy the human resource, information technology, financial and regulatory needs of the organisation
- Managing political needs for consensus and participation, alignment with government policies and achieving the social and economic impacts desired by government
This last aspect is the special challenge that government organisations have to satisfy, usually in an environment of change. Importantly, all aspects are defined in business terms, not in metrics that relate to technology and its functional attributes. This extended view provides new options for organisations to improve and clarify their justification for IT investments by exploiting the full range of intangible and tangible value creation. And each IT initiative will have a different profile in terms of the value it will provide and on which valid investment decisions can be made.
Gartner recommends that potential IT investments are evaluated through five perspectives — or, as we prefer to call them, the “five pillars”:
- The alignment between the IT investment strategy and the realisation of the organisation’s strategic business goals and objectives
- The impact on the organisation through changes to business processes and integration with constituents, partners and suppliers
- Architectural integration, scalability and resilience of the databases, operating systems, applications and networks that the organisation has implemented or plans to implement
- The conventionally understood “direct payback” benefits that an IT investment can deliver, such as cost savings
- Risk of exposure to failure or underachievement of the IT investment
But it is not enough to justify each IT initiative in isolation. For example, most modern enterprise applications are really major business change projects, significantly supported by IT. Upgrades and enhancements to these cannot be regarded as stand-alone initiatives because they will integrate with other applications and internal and external business processes. The total nature and spread of initiatives should be seen as a portfolio of IT investments which needs to be regularly reviewed and adjusted.
Gartner defines a portfolio of four basic categories of IT investments. Two of these relate to the renewal and transformation of IT infrastructure. Renewal investments aim to maintain functionality of the IT infrastructure and keep it cost-effective, while transformation investments are necessary if an organisation finds its core infrastructure limits their ability to develop applications critical to long-term success. This is the traditionally regarded domain of IT investment.
The other two investment categories refer to business-directed benefits. Business solution initiatives improve processes to provide short-term efficiency and effectiveness benefits. These are aimed at enhancing operational outcomes of existing processes, not at changing processes fundamentally. And the fourth portfolio category relates to “experiments” in new technologies that present opportunities or imperatives to adopt new business models and processes.
Every organisation needs to define and review its portfolio of IT investments. Strategic imperatives will change over time and constraints will vary. Absolute spending and synergies between individual IT investments should be reviewed for appropriateness as demands change. So the blend and balance of IT investments must be actively adjusted to adapt to this dynamic environment and ensure that the portfolio will meet the organisation’s needs.
So government organisations can take some large and practical steps to improve how they articulate and justify the business value of their investments in IT. But the final challenge is in bringing their initiatives to fruition, with success depending hugely on what underlying business change is being sought.
There are many reasons why benefits are not realised. Some of the most common relate to IT governance — the basics of defining accountabilities, placing those accountabilities with the right people, and then having processes in place to consistently manage for achieving the desired benefits.
A baseline of where things stand at the project’s start is often not conducted. Project management techniques and processes often focus on delivering a project on time and on budget, giving scant attention to the impact that changes necessary for meeting deadlines and budget requirements might have on deriving the value and benefits being sought. Unfortunately many “on time and on budget” projects yield only limited and transitory benefits. This can invariably be traced to inadequate investment appraisal and benefit realisation processes.
Despite the recognition in most enterprises that there really is no such thing as an “IT project” any more, someone in the IS organisation is often held accountable for the identification and management of benefits. Benefits are realised when something changes, and that change is usually in a process, a product or service — or in making available the option to do something that might be important in the future. Most of these are under the control of the business management team.
The message for government entities is that an IT initiative is just like any other investment an organisation may make. Decide on and manage IT investments in an enlightened business-like manner. Understand the value they offer and govern them to achieve real gains in constituent, political and organisational value.
Richard Harris is vice president of Gartner in the Asia Pacific, based in Sydney. He leads Gartner’s business and technology strategic research in the Asia Pacific region